1. Field
The present invention relates to systems and methods for facilitating exchanges of financial instruments, and more particularly to systems and methods for facilitating online transactions for accounts receivable.
2. Background
It is common practice to use computer systems for the analysis, purchase, sale and management of financial instruments, such as stocks, bonds and mutual funds. Computer systems can provide an efficient means for carrying out the business processes associated with financial instruments. When computer systems are connected over general purpose networks such as the Internet, multiple entities can efficiently communicate about and transact for financial instruments within the scope of such networked computer systems to form an online market. Such online markets, like NASDAQ®, are similar to traditional brick and mortar financial markets. Recently, specialized online markets for the purchase and sale of certain categories of non-performing financial instruments, or distressed debt, have emerged.
Specialized online distressed debt exchanges may facilitate both primary and secondary markets. The primary market processes transactions between the originators of financial instruments and the purchasers or servicers of those instruments, while the secondary market processes transactions in financial instruments between investors and between investors and servicers. Typically, the categories of financial instruments available in such specialized, online distressed debt exchanges may include, but are not limited to, charged off consumer credit card receivables, automobile loan deficiency receivables and mortgage loan deficiency receivables.
Traditionally, investors in the primary and secondary distressed debt markets have transacted in large groupings of financial instruments, known as portfolios, either directly or through a brokerage system. The advent of specialized, online distressed debt exchanges has catalyzed a trend towards transacting for smaller groupings of financial instruments, and in some cases individual instruments, in addition to large portfolios. For example, a buyer may wish to purchase financial instruments within a certain zip code.
The known specialized, online distressed debt exchanges traditionally offer financial instruments for sale in both set-price and auction formats. Additionally, it is known in the art for an online marketplace to suggest a price of an instrument based on market information and link to third-party entities such as brokerages, due diligence servicers and collection servicers. Also known in the art is the practice of analyzing the financial instruments for sale and assigning ratings to certain parameters. These ratings can assist all users of the online marketplace in sorting and ranking financial instruments.
Sellers of financial instruments on these known specialized, online distressed debt exchanges may have to enter their account information manually, which can be time consuming and introduce human error. In other exchanges, sellers may simply be able to post the description of an account or portfolio, or transfer account information in batch. Additionally, the system users may only trade with the few other users of these known exchanges.
Consumer debt is currently tracked by consumer reporting agencies (CRAs), such as Equifax®, Experian® and Trans Union®. These CRAs have created vast databases of consumer credit information, including specific categories of data regarding particular financial instruments related to particular consumers on a current and historic basis. It is commonly known in the art to query this database through known means, most commonly name, address and social security number, to learn about consumer debt and calculated consumer credit ratings.
Currently there is no online marketplace for financial instruments that facilitates transactions for accounts utilizing account data already stored within a CRA database, or other such industry-wide database. Additionally, there is no such online marketplace that offers a knowledge base of accounts receivable laws, rules and regulations to evaluate transactions. Also, there is no current method for rapidly creating critical mass for such a market and injecting liquidity into such a market by lowering barriers to entry, in particular high transaction costs arising from current market inefficiency and the high level of expertise required to process a transaction.
Therefore, there exists a need for an online marketplace that allows users to transact for accounts based on their account data already housed in a CRA datastore. Additionally, there is a need for an easy method of consolidation of accounts from multiple sources to facilitate servicing efficiency. Such a marketplace would attract a large number of users, providing all users with a broader range of transactions than currently available. Additionally, such a marketplace would inject liquidity into the exchange of accounts receivable by reducing transaction costs and limiting the level of subject matter expertise currently required to process such transactions. There is a need in the market for such an online marketplace that also analyzes the account data with respect to a knowledge base of accounts receivable laws, rules and regulations.